Overdrawn and Overworked: How Banks Are (Still) Screwing Consumers With Overdraft Fees

Not only are people’s bank fees being manipulated so that they’re forced to pay more money in overdraft fees – but unless they can come up with the money quickly, their debt grows. (Image: Debit cards via Shutterstock)

We have all been shafted by overdraft fees from our bank at one time or another. It’s an annoyance and a frustration, especially for those of us who don’t have much money to begin with. It’s also a constant puzzle: if one doesn’t have $5, how is that person going to pony up an extra $35 for the fee? Yet banks continue to charge fees and rake in money, making $35 billion on overdraft fees in 2014.

To get a better handle on the problem of overdrafts, we need to understand the history of such fees and reframe how we look at them – shifting our perspective to see overdraft costs as a sort of a loan, rather than a fee.

Evolution of the Overdraft Fee

After World War II, American society changed in many ways, including the way people borrowed money. Credit and how it was issued began to change, as pawning and open-book credit – in which goods are shipped with the recipient promising to make payments – declined in usage, and were replaced with other forms of loans such as payday loans, credit cards and overdraft protection.